UK Budget: Labour waters down North Sea oil and gas licensing ban vow with 'tie backs' compromise

But the North Sea oil and gas sector has branded the compromise “immaterial” after Chancellor Rachel Reeves ignored repeated calls to bring forward reforms to the energy profits levy, due not to take place until 2030 after failing to announce a change of heart in her Budget.

Labour’s manifesto, published before last year’s general election victory, vowed to end new North Sea oil and gas licences. But the government has come under intense pressure for a re-think amid the Chancellor’s priority to boost economic growth.

With pressure ramped up from the industry and opponents over the pledge to ban new permits, alongside continuing the controversial energy profits levy, Labour has confirmed a loosening of its permanent ban on new licences.

The UK government has claimed the plan implements Labour’s manifesto commitments to manage existing fields for the entirety of their lifespan, and to not issue new licences to explore new oil and gas fields.

As part of this, the UK government will introduce new transitional energy certificates, which will enable limited oil and gas production on or near to existing fields. This is so long as the additional production does not require new exploration and is already part of or links back to existing fields and infrastructure, and can be justified as necessary for a managed transition.

The compromise was first tabled in a review by Professor John Underhill, director of energy transition at the University of Aberdeen’s interdisciplinary institute, published in August.

READ MORE: Labour urged to agree to 'bespoke' oil and gas permits after independent review findings

Prof Underhill’s research called on UK ministers to allow near-field and infrastructure-led exploration, as well as permits around strategic and critical infrastructure, consisting of existing pipelines and fields.

READ MORE: Anas Sarwar backs oil and gas drilling and calls for 'balanced approach' to North Sea

Analysis from campaign group, Uplift, has found new discoveries within a 50km [31 mile] radius of existing production sites, that would require a new licence to proceed, contain just 25 million barrels of oil and 20 million barrels of equivalent natural gas.

This would be a small proportion compared to the Rosebank oil field, still to be determined by the UK government, that would involve the extraction of nearly 500 million barrels of oil and gas-equivalent over the course of its lifetime.

Russell Borthwick, chief executive at Aberdeen & Grampian Chamber of Commerce, has warned the “limited flexibility on licensing is immaterial” due to the continuing tax burden.

He said: “The industry put forward a case for a reformed EPL that would have delivered more than 100 projects, £50bn of investment and protected around 160,000 jobs. Crucially, it would have also delivered an addition £10bn in tax revenues over the next decade.

“Without so much as a mention in the Chancellor’s statement today, the UK government has instead opted for a cliff-edge end to North Sea production and to tax the industry to death inside five years. Jobs will be lost in their thousands as a direct result of this government’s failure to act.”

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UK Energy Secretary Ed Miliband said: “The North Sea’s workers and communities have helped power our country and our world for decades. This is our plan to ensure they continue to do so for many decades to come.

“This is a world-leading plan with workers, unions, businesses and communities at its heart, and implements in full the government’s manifesto commitments. It is a plan which will ensure that the North Sea is an energy powerhouse throughout the 21st century.”